Ukraine’s Business Ombudsman – First Quarterly Report

August 2, 2015

This week saw the release of the very first quarterly report of the newly created, independent, Business Ombudsman in Ukraine. 32 pages of very blunt and clear-eyed text. It is a most welcome, if not unsurprising appraisal of where Ukraine is at, compared to where it has to go, the key problems, the proposed solutions, and the actions and resolutions of the Ombudsman’s Council so far.

Credit to Algirdas Semeta and team for such a concise, accurate and no-nonsense document.

It should be noted that the document when published stated the Ombudsman’s Council had received 172 complaints – That number now sits at almost 250 and will undoubtedly continue to rise as the organisation’s existence and reputation gains awareness across the business community within Ukraine.

There are no surprises in the contents where statements such as this are prominent – “Until the state authorities serve their people instead of acting as their ruler, until their oversight bodies help business meet regulatory requirements instead of punishing it, much-needed economic growth will remain difficult for Ukraine to attain.”

The Ukrainian State is and always has been “centralised” with a “State-ist” mentality that if charitably put, is a Soviet hangover. If uncharitably put, where the Ukrainian State and Ukrainian business now finds itself is a result of the complete and utter failure of every single politician and State institutional head past (and perhaps present), ever since Ukrainian independence.

The entire point of the “decentralisation” of power to the regions is to make the regions responsible to the local constituents. Whether it is to have the desired results, or adversely (at least temporarily) empower the fiefdoms of the local elites, will very much depend upon the local societies as well as the political determination of the core to insure the periphery governance and administrations are accountable to their constituencies.

Within the report, the two named worst offenders for “punishing” business in Ukraine were the State Fiscal Service and the Prosecutor Generals Office.

The State Fiscal Service is an institution that has only very recently been moved to within the competency of the Ministry of Finance, and thus now falls under one of the most competent Ministers in the current government (if not ever to hold office in Ukraine) Natalie Jaresko.

Time will tell if Ms Jaresko will manage to control and reshape a chronically corrupt and shambolic State institution into one that is at least semi-competent and a little more ethical.

The Prosecutor Generals Office, which is renowned for prosecuting business as a (rent-seeking) sport, is about to undergo a traumatic change too – albeit unlikely to take shape until 2016 due to the need for constitutional changes – those changes outlined in this Venice Commission preliminary opinion.

A major recruitment drive amongst the legal profession is also under way, with a view to replace almost 70% of the existing PGO staff from top to bottom.

In the meantime, the US Embassy Kyiv is putting particular pressure upon the current Attorney General Vitkor Shokin, to redistribute responsibilities amongst those that currently hold the top positions.

For example, one of his his senior deputies, Vitaliy Kasko will soon take over control the department responsible for investigation into corruption committed by officials occupying senior ranking positions. A department that all AG’s historically have closely guarded as their own (often for nefarious reasons) within the PGO machinery.

Be assured that such “redistribution” within the current PGO hierarchy is the direct result of US “encouragement”.

It would also be no surprise to see Mr Kasko and his soon to be newly acquired department, receive robust support and assistance in frying some currently un-fried big fish. After all, patience is wearing particularly thin when it comes to seeing the heads of serious players roll before the rule of law.

Likewise, do not be surprised when 1st November arrives and a new customs system operates at Odessa Port, to see the State Fiscal Service and PGO offices on the port side close, leaving only newly minted customs officials on site.

It seems unlikely that either State Fiscal Service or PGO will have lost their top spots as “worst offenders” in the eyes of the Business Ombudsman by the time the second quarterly report is published. Indeed, numerous reports will probably be written before these issues are replaced by others, however quarterly reports do tend to provide the ability to monitor trends in almost real time.

Likewise despite any rhetoric to the contrary, it seems likely that the external “friends/supports of Ukraine” will have to give no end of “tough love” to provide the much needed antidote to the “centralist/State-ist” mindset of the political class and institutional elite.

Nevertheless, read the first ever Business Ombudsman’s report linked above, and when the tenth is published in due course, let us see just how far the business climate has changed for the better.